How Will Funds React as Commodity Prices Fluctuate?

Corn and soybean producers will have to make the existing market system work for them, even as commodity prices fluctuate, says Arlan Suderman, Water Street Solutions, during a U.S. Farm Report Market Roundtable filmed this past week at the 3i Show in Dodge City, Kan.

Recent fund activity serves as a good illustration.

"It wasn’t too long ago when they had about $65 billion worth of net ownership of corn, soybeans and wheat," Suderman says. "That’s down to about $26 billion as of the last report."

"So the funds are actually getting out of the market?" asks USFR farm director Al Pell.

"They really are," Suderman says. "They lost money in 2012, even with the bull market, you would think it would have been an easy market to make money on, they lost money. And with Ben Bernanke kind of coming out once every three or four weeks and making comments swinging them back and forth, they will chase an asset class if they see an opportunity where the fundamentals look convincing for them. But they’re very skeptical of the commodities right now."

Charlie Sauerwein of WindRiver Grain agrees.

"You’ve got the old-crop corn/new-crop corn structure," Sauerwein says. "You saw July-Sep corn, July goes off the board tomorrow, you’ve seen that explode out to about $1.60 inverse. Folks, that’s huge, and it’s just saying, corn is so tight right now, and that’s why it’s tough. We may print a 700 million carryout on the corn, but it is very, very tight right now to try to bridge that gap from old crop to new crop."

Watch the following videos for more questions and answers from the 3i Show featuring Suderman, Sauerwein and broadcaster John Jenkinson of The Ag Network.
View USFR Market Roundtable Segment 1: